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Sweden behind in fight against money laundering

If someone robs a bank with a gun, they call 112 and the police come directly. But when it comes to suspicious money transactions the work is hopelessly neglected - and in Sweden more so than in other countries, according to Gavin Neilson, PA Consulting financial crime expert.

The financial criminals are light years ahead of all the countries in the world.

“The global cost of financial crime is close to SEK 1,500 billion per year and this crime involves some 40 million people who are trapped in human trafficking and modern slavery,” says Gavin Neilson during a visit to Stockholm.

He is an expert in financial crime and works as consultant the innovation and transformation consultancy, PA Consulting. He advises authorities, including the FSA, and banks, including those in the Nordics.

Globally, SEK 7,400–18,500 billion laundered per year, according to the UN.

“The cost to businesses and banks of complying with the money laundering rules has increased by 400 per cent since 2005. Still, only one per cent of profits from financial crimes have been stopped,” he says.

Gavin Neilson sounds a little disappointed in the conference room at PA Consulting’s office in Stockholm. He says the authorities here are far behind the British and American authorities.

“The Nordic region is five to 10 years behind the UK and the United States when it comes to the authorities review.”

But Gavin Neilson claims the Nordic countries have the chance to take a technological leap past the Anglo-Saxon countries.

“Some banks in the UK and the US are so busy with checking old sins, by going through money transactions manually, that they do not have time to steer the bank to look effectively on today's transactions via modern technology, such as artificial intelligence. They spend days and weeks figuring out who is really behind a company set-up in several layers, but that can be reduced to seconds of work with new technology,” says Gavin Neilson.

To succeed, he believes the banks need to cooperate with each other.

“It's crazy today. If a criminal is discovered in a bank, they can go to the neighbouring bank because they do not share data with each other,” he says.

He is positive about the fact that several Nordic banks began to create a common Nordic ‘Know Your Customer' infrastructure for corporate customers one year ago. But the best thing would be for all countries to introduce such infrastructure and then collaborate with each other.

In addition, he believes it must be a two-way communication between the banks and authorities. Today, banks send suspicious money transactions to the authorities but little happens.

“If a criminal robs a bank with a gun then someone calls 112 and the police comes directly, sometimes before the robber has left. How can it be that the response is not the same when it comes to suspicious transactions?”

The fact the Nordic region is lagging Britain and the United States is due in part to the fact that Anglo-Saxon countries authorities have had higher fines, he believes.

“If you look back 10-15 years fines were low in Britain and America. The cost for banks failing was not so great.”

For a long time Finansinspektionen, the Swedish equivalent of the FSA, could fine up to SEK 50 million in criminal charges, which Nordea received for failing to prevent money laundering in 2015. For the same reason Handelsbanken got a SEK 35 million fine.

This is small money for banks that have profits of many billions per year. But since the summer of 2014, Finansinspektionen can levy fines of up to 10 percent of the turnover of an institution the previous year. In the case of Swedbank, we are talking about fines of SEK 4.4 billion. But the inspection has so far have not given higher fines than 50 million.

When it came to Danske Bank’s suspected money laundering in Estonia, the Estonian financial inspection warned the Danish Financial Supervisory Authority in 2007, 2009, 2012, 2013 and 2014, without anything happening.

If all banks and authorities would cooperate, Gavin believes it would be possible to increase the number of criminal transactions stopped from one per cent to 10 per cent. But he is very unsure when this will actually happen.